By Millie Munshi (Bloomberg)

Copper rebounded after the dollar eased, renewing speculation that investors will buy the metal as a hedge against inflation.

The dollar fell as much as 0.4 percent against a weighted basket of the euro, yen and four other major currencies after climbing as much as 0.7 percent. Copper has gained 23 percent this year as the U.S. Dollar Index dropped 5 percent, boosting the appeal of raw materials as a store of value.

“It's all tied to the dollar,” said Matt Zeman, a trader at LaSalle Futures Group in Chicago. “It's hard to see copper making any significant moves without the dollar.”

Copper futures for July delivery rose 3.3 cents, or 0.9 percent, to $3.7495 a pound on the Comex division of the New York Mercantile Exchange. Earlier, the metal dropped as much as 0.8 percent.

The copper market will be “shaky” as traders follow the fluctuations of the dollar, Zeman said. “People are in a wait- and-see period and are looking to the currency market for direction.”

Copper reached a record $4.2605 a pound last week, partly on demand from speculators and other investors. Commodity prices have surged this year as a slumping dollar spurred demand for raw materials as a hedge against inflation.

The Reuters/Jefferies CRB Index climbed to a record today, and the UBS Bloomberg Constant Maturity Commodity Index has gained 21 percent in 2008, outpacing stocks and bonds.

China Imports

A report showed Chinese copper imports last month were “strong,” said Eric Wittenauer, an analyst at Wachovia Securities in St. Louis.

China imported 246,119 metric tons in April, the Beijing- based customs office said today. Purchases were 240,634 tons in March and 304,672 tons a year earlier.

“In the base metals and other commodities, the market still does not fully appreciate the underlying demand coming from a strong global economy,” Chip Hanlon, who manages $1.5 billion at Delta Global Advisors Inc. in Huntington Beach, California, said on May 9.

Gains may be limited as Peru's miners suspended a national strike planned for today. Peru's Mining Federation, which represents 28,000 workers, said May 9 it was giving the government time to pass legislation that would provide miners with a greater share of profits and higher pensions and contract workers with more rights.

On the London Metal Exchange, copper for delivery in three months rose $160, or 2 percent, to $8,260 a metric ton ($3.75 a pound). The price is up 4.6 percent in the past 12 months.